Sunday, June 28, 2009

Naming a Problem: The MTA Gives Ratner the Right to Name Brooklyn Subway Stations “Barclays”

We don’t want to be instantly negative about something that arguably might have some appreciable positives, especially if we only just heard about it. We need time to think. And taking time to think is what we believe the MTA board should have done when it was proposed (upon 48 hours notice to the board) that the board approve sale of the right to name Brooklyn’s interlinking Atlantic Avenue and Pacific Street subway stations to Bruce Ratner’s Forest City Ratner in connection with the Atlantic Yards Nets arena he is hoping to build.

The MTA Board Was Told. . .

This is all the extent of the description supplied to the MTA board in the “Staff Summary” providing information about the transaction:

. . . FRC will also pay a fee of $200,000 per year to have the subway station at Atlantic Avenue/pacific Street include the name “Barclay’s Center.” (Sic)

. . . Not Much- Not Much

Not much. We mean not much information and perhaps not that much money either. The price for a 30-second Super Bowl ad this year is $3 million. Also, in significant contrast, Forest City Ratner sold Barclays the right to name the arena the Barclays Center for $20 million a year for 20 years (totaling $400 million). Although the above description that went to the MTA board doesn’t say so, the information about the subway naming rights deal is that it is also similarly a 20-year contract. In other words, the MTA negotiated a naming rights deal for the subway that is 1/100th the value of the naming rights deal Ratner negotiated for the arena.

Compared to Some Real Money

The first year’s $200,000 to name the subways may seem a paltry trifle, but in 20 years’ time that $200,000 will assuredly be a truly trivial sum to pay for advertising. The price for a Super Bowl ad this year is 11% higher than last year’s (whatever they say about the network television being a fading medium). The price for a 2008 30-second Super Bowl ad year was $2.7 million. The arena would take about two years to build and the notion is that the station names would not change (or payments start?) until 2012. Going back to 1988 we find that the cost of a 30-second Super Bowl ad was only $625,000 to $675,000 (with NBA projecting the 1989 figure at $700,000). Projecting this trend forward, we can estimate that in 2029 the price of a Super Bowl ad would presumably be more than $14 million, at which time the annual payment for naming the subways stations would still be $200,000- 1.4 one-hundredths (or just 1.4%) of that $200,000 amount. . .

. . . Not bad if you are Barclays! 10 million people pass through the stations every year.- By 2029 who knows?

Getting Kinda of A Feeling?

How did the MTA negotiate handing Ratner the right to put the Barclay name on New York’s Brooklyn transit hub subway stations? WNYC reports that the MTA’s Gary Dellaverson, the MTA’’s Chief Financial Officer, explained: “We kinda felt our way into it.” That may be an understatement: Even as the MTA’s board meeting to approve the deal was underway, an MTA staffer was in the hallway outside the meeting on his cell phone trying to find out exactly what the deal was and what the board in the room next door should be told about it. When the board bothered to ask, it was clarified that the right to have the Barclays name on the subway station did not extend to the right to have the Barclay name on the interconnecting Long Island Railroad Station/Terminal. (Could it then still be named something else?) There were obviously a lot of other questions the board should also have been asking.

Boostering and Boasting Doesn’t Make It So

The MTA was promoting its ad-hocing of this questionable deal as if it was some sort of achievement:

The 20-year contract is the first naming-rights deal for the cash-strapped Metropolitan Transportation Authority, which has unsuccessfully tried to find sponsors for other stations around the city.

Board members and staff heralded the arrangement, approved on Wednesday, as a major victory for the chronically underfunded mass transit system.

No Land Grab deftly cut the legs out from silly arguments that this was any sort of achievement. We quote at length:

Metropolitan Transportation Authority Chairman H. Dale Hemmerdinger (who was recently sued by two family members who accuse him of bilking them out of millions of dollars), made a big deal at yesterday's MTA board meeting about the deal to append the name Barclays to the Atlantic Avenue/Pacific Street subway station:

"We’ve been trying to make money off naming rights for quite a while. This is the first time we’ve been successful... It’s a very important point."

It sure is an important point. Because all the MTA had to do to be "successful" in selling naming rights to the station for $4 million over 20 years was to throw in development rights to an eight-acre railyard for $114.5 million less than the MTA's own appraisal, reduce the down payment for said yards by 80%, and extend the payment terms by 22 years at a below-market interest rate.

With that kind of "successful" sale, we can expect the MTA to be coming back to the taxpayers for another of their own massive bailouts very soon.

We have to note that the MTA (and ESDC) are also “heralding” their arena deal itself as if it is some sort of achievement even though the city’s Independent Budget Office has said that it will be a net financial loss for the public and the city’s economy, notwithstanding what a tremendously good deal it is for Forest City Ratner.

The “Present” Presently Valued

In its boosterish accounts, the MTA has attempted to inflate the apparent benefit of the subway deal by describing it as a “$4 million” deal. But obviously the present value of $200,000 paid over 20 years starting in 2012 or afterwards is not $4 million. Previously we have not wanted to overstate the $20 million-per-year figure Ratner is getting from Barclays as a “$400 million” deal. Accordingly we have noted that it should be viewed as having a present value of about $187.3 million. Similarly, the MTA’s new deal on a present value basis would be about $1,873,000, still much less than the price of one 30-second Super Bowl commercial.

Questions: Why Does Ratner Always Get the Right to . . .

There are, of course, those who properly asked why collecting $20 million per year to have Barclays name on the arena was a privilege that was accorded to Ratner since the public was paying to build the arena and it was ostensibly owned by a public authority. There is a convincing argument that the $20 million per annum should be going to the city or a public agency.

Now there is another question: The right to name the subway is being sold to Ratner for $200 K per year but it is arguably worth 100 times more and will presumably be passed on by Ratner to Barclays at a markup whose premium reflects the much greater value. How should the value of this additional giveaway to Ratner be calculated? $187.3 million minus $1.873 million= $185.427 million? Subsequent documentation that may later become public is unlikely to make the amount of Ratner’s markup, ($185.427 million or whatever) entirely clear: Some of the markup’s value is likely to be used to compensate Barclays for the fact that Ratner is no longer building an arena by a name architect or an arena that is considered to be high-quality design.

Ways to Find Value: for Instance, a One-Month Deal for $95,000

There are, of course, ways other than entirely by feel to negotiate such advertising transactions. For instance, there is a service, Standard Rate and Data, that provides a huge amount of information about such things. And, of course, the public can use the MTA’s site to get information about all the opportunities to advertise in transit facilities the MTA has been selling for years.

Alternatively, the MTA could refer back to an MTA plan discussed by the New York Times as recently as 2008 to line lengths of New York City subway tunnels with ads. (See: Advertising: The Train Is Coming. And With It, More Ads, October 16, 2008. According to that article it was envisioned that: “It will probably cost around $95,000 for a full month of ads in a tunnel.” The article talked about the short length of tunnel for the Times Square - Grand Central shuttle service.

This Practically Means. . .

In practical terms, WNYC reports that by selling the right to put the Barlcays name on the station, the MTA “has committed to using to using the name on streets, on signs on maps and on schedules, but they haven’t committed to using the name yet in announcements.” This creates some practical problems. Putting the name on maps and schedule will clutter them. Also, what sort of time lags will there be if the deal terminates? (WNYC reported on how a Boston naming rights deal was simply abandoned by the sponsor.) With stations and maps all labeled Barclays, how long after payments stop is everything put back the way it was and when does the public cease referring to the stations by the Barclays name? For instance, in terms of lag, the New York City subway map still refers to the “World Trade Center,” which is eight years gone.

Singing a Bluesy Jingle?

The idea touched upon by WNYC that subway conductors might be required to announce the Barclays Center is amusing: Perhaps someone has thought of having them sing or play a Barclays jingle when the train comes in?

Got Subway Change?

A lot of what happens as a practical matter depends on Barclays remaining in existence and doing business under the same name. We wrote about this previously:

If this is appropriate the MTA could sell off the entire subway system at $200,000 a year per station. Columbus Circle will now be the Columbus Circle/AOL Time Warner Station. Oops- - No AOL anymore, just Time Warner then. Grand Central could be Grand Central/Pan Am Station. Oops- - No Pan Am anymore, Met Life then. Given all the turmoil in the financial world, will Barclays be around for “20 years”? Maybe so. If they have been around long enough to have been involved in the slave trade, maybe it can be argued they will be around for a few more years.

We probably should have pointed out that although Barclays has, in fact, been around for a while, actual names change: The slave trade operations where not under the name of Barclays. Here from the Brooklyn Paper:

The Restitution Study Group, headed by Deadria Farmer-Paellmann, a former Brooklynite, alleges that Heywoods Bank — which is believed to have merged with Martins Bank in the 1800s, which, in turn merged with Barclays Bank in 1969 — took part in 125 slave-trading voyages, enslaving more than 38,000 Africans, more than 6,000 of whom died en route to the Americas.

After our story contemplating the renaming of the Columbus Circle and other major stations, the New York Times wrote something similar, a sort of defanged, fluffed-up version. From the Times story:

And if a company can pay to get its name on any station, a New Yorker might wonder what’s next: Coca-Cola Presents 59th Street-Columbus Circle?

The answer is maybe. Once upon a time, geographic relevance determined a station’s name, but now, the authority says it is open to any naming agreements that can raise revenue for its transit system, including ones not directly tied to location.

* * * *

“It’s not like Taco Bell saying it wants Grand Army Plaza or something like that,” said John H. Banks III, a board member since 2004.

. . . . “To rename the 59th and Lex stop the McDonald’s stop — it ain’t going to work. I don’t think it will stick.”

* * * *

A few New York businesses contacted on Tuesday said they were not interested in a piece of the underground. Zabar’s, the Upper West Side food emporium, said it was not interested in the 79th Street station. Macy’s said a sponsorship deal at 34th Street was not in the cards.

(* In terms of the likelihood of the arena being built we think that Develop Don’t Destroy Brooklyn made worthwhile points in assessing that essentially there has not been an advance of the project but a rewinding of the clock back to circa 2005-2006 with some additional difficulties for the developer slathered on top. Lawsuits are still outstanding and there are also a number additional factors that make it a more uphill battle for Ratner.

Initial approvals for a redesigned project have just been issued, the project is substantially worse than it ever was before, the process has been even worse, opening the public agencies up for lawsuits on multiple grounds that didn't exist before, there has been a political shift pretty much across the board (including those running for various pertinent offices) excluding only Bloomberg, Paterson and Markowitz, the tax code is now explicit that the arena financing is NOT permitted except for a grandfathering of a previously permitted loophole that will close 12/31/’09, the credit markets are rather unreceptive, with especially good reason to be vis a vis Ratner whose stock has gone down to zero and whose debt rating is entirely speculative, there is a scandal on the Yankee Stadium bonds’ underlying real property assessment that may blow up further causing those bonds to be declared taxable which would also make the arena bonds almost impossible to issue in this time frame.

And public hearings are coming. Hearings which the New York Times, WNYC and the rest of the media will be covering.)

This transit advertising story is actually a much bigger story and does not deserve to be treated as lightly as the Times did. To be fair, the Times article briefly acknowledged that the MTA’s stewardship is an issue with the following (emphasis supplied):

“It’s always a question of balancing our need for revenue and our stewardship of public space,” said Jeremy Soffin, a spokesman for the agency. Advertising may make the most sense for a company associated with a station, he said, “but we’re not closing anything out.”

The Times covered this issue of stewardship better in its (earlier mentioned) 2008 article about putting advertising in the subway tunnels. To wit:

“The subways are not a wholly noncommercial site already,” said Robert Weissman, managing director of Commercial Alert, a nonprofit advocacy group in Washington. “But there’s a big difference between signage and traditional billboards, and the new digital media and turnstile wraps and other innovations.”

Mr. Weissman added, “It just contributes to the overwhelming assault on people and their everyday lives that makes it increasingly challenging to escape commercial messaging.”

The Joy of Advertising

We are not, per se, against advertising. We support the sensory onslaught of advertising in Times Square for the joy of its pure garish absurdity. It is something the Municipal Art Society had to fight the city administration to achieve. But the advertising of Times Square, like its unparalleled level of jostling density, can be enjoyed because it is something that can be walked away from and left behind.

In other contexts, groups like the Municipal Art Society have worked to constrain, for instance, the clutter of “nasty” newsracks taking over the new York’s city streets or “Billboards Gone Wild.” It isn’t really that long ago, only the days of Ladybird Johnson, that the public consensus was to pass a law preventing the advertising clutter of billboards on our the national highways.

100 Years Plus of MAS “Stolidtude”

The Municipal Art Society’s efforts to curtail advertising clutter specifically in the subways go back to the very beginning of the subways in the early 1900s: The first New York subway line opened in 1904. When ads starting springing up obscuring the terra cotta subway stations and their incorporated art, the Municipal Art Society objected on the grounds that under the Rapid Transit Law the subway lines had been turned over to the companies operating them as a “public thoroughfare.” In Shaping the City: New York and the Municipal Art Society by Gregory F. Gilmartin we find the following:

“Legally the subway is the highway of the city,” explained John Martin, the chairman of MAS’s Committee on Advertising Signs, “and it is no more lawful to put advertising signs in it than it would to place frames along the curb of Broadway and fill them with posters. Doubtless a large revue might be got if the gutters were so adorned; but . . . the law forbids such a misuse of the streets.”

Good Governance Reactions? No Chance!

With the naming rights deal being sprung even on the MTA’s own board with only 48 hours of notice, groups like the Municipal Art Society were certainly denied sufficient time to weigh in on the issue the station naming rights. We wonder who did. For instance, was the ($185.427 million) subway naming rights for Ratner simply tacked onto the approvals going to the MTA board after it was determined that MTA members would be directed to vote for it, or did Mayor Bloomberg and Governor Paterson actually know this was part of the deal when the MTA members were getting their direction to vote for it?

Not Just Aesthetics; An Interference With Mass Transit Functions

Excessive advertising clutter in the subways is not only a matter of aesthetics; it is also a question, going right back to MAS’s involvement with the subways in the early 1900s, of how the subway functions. Again, from Shaping the City:

Orr [President Orr of the rapid Transit Commission] admitted that so many signs had been installed that, in the ensuing clutter passengers were having great difficulty locating the terra-cotta and mosaic plaques that announced the stations.

Whee! Did It Before, Can Do It Again

Maybe some things never change. And we still have advertisements in the subway. In 1976, in the process of writing a paper in Urban Planning school for Sigurd Grava, our research turned up an interesting little scandal. A central premise of our paper was that proper mass transit information was critical to proper and full utilization of the transit system. When looking at the paucity of subway maps on display in the subway system we discovered that the Transit Authority did not have the ability to add additional maps on the walls of the stations because they had sold all the wall space to a separate independent company that in turn, resold all the space for the posting of advertising. If the public officials running the subway system wanted more maps on the walls they would have been required to buy the space back for that purpose. We remember that the public officials and the company seemed rather defensive of this arrangement.

Similarly, on buses, especially the buses that existed back in 1976, the best information system for finding your way, looking out the windows at the street signs, was impeded by advertising. Advertising placards hung low in the corners of the buses: Any reasonably tall individual who was standing while riding the buses had their view of most of the street blocked by the advertising because of the way the buses were designed, putting low-placed advertising placards exactly where windows would have been helpful.

Mapping a Problem

The renaming of the subways stations with the name “Barclays” may not itself create an insurmountable amount of clutter that interferes with the public finding its way at the station but the requirement that the name be put on the subway map is a problem. “Yankee Stadium” is on the current subway map. “Madison Square Garden”and a lot of other key sites are not. Even Ratner’s “MetroTech” which has its name on a station does not show up on the map. Designing a workable subway map is an exercise in critical economy. There is so little space available on the map and it is essential to communicate the most vital information without allowing the clutter of too much information to blot out those essentials. We know this because we were communicating and conferring with one of the designers of the current subway map as it was being designed. The map is a phenomenal exercise in the careful selection of what is left out and what is put in. The idea that the designer’s right to come up with the best way to present information should be contracted away (for a score of years) for a trivial amount of advertising dollars is preposterous. “Yankee Stadium” and the “World Trade Center” which are both on the current map are on some of the map’s less cluttered `real estate.’ The Barclays Center would be in one of the most cluttered sections, a hub, with a tight confluence of line where a lot of other things are going on. There are also a lot of things going on there in real life. For instance, the Brooklyn Academy of Music shares the same location. Does putting the Barclay Center on the map rate to the exclusion of citing the that the location is BAM’s? In fact, was BAM offered a chance to bid to have its name on the stations? If not, shouldn’t it have been given an equal shot at such cheap advertising?Getting with the Program? The MTA speaks of the sale of this right to Ratner as the beginning of a program. We can just imagine the confusion in trying to find your way when all the important subway stations in the system are overlaid with corporate brand names shifting faster than those in a drug store toothpaste or shampoo aisle. We are not talking about whether anyone remembers Bucky Beaver’s Ipana here: What if the 59th and 5th N, R W stop was named the General Motors Building?

The New York Times wrote in 1988 about the confusion caused because of how “All over Manhattan, buildings are wandering around in a state of address migration.” (See: How Builders Invent Vanity Addresses, by Richard D. Lyons, Sunday, May 22, 1988.) The Times article notes:

. . while some developers see profit in these location mutations, they are giving headaches to other groups, such as taxi drivers and mailmen.

After documenting this with comments from Steven Brauch, the head of the Taxi Driver Institute at La Guardia Community College, the article goes on:

Such permutations were viewed more seriously, however, by John M. Nolan, who as postmaster of the New York City Division of the United States Postal Service is responsible for mail delivery in Manhattan and the Bronx. ''These changes have been going on for a long time,'' said Mr. Nolan, ''and are becoming a big problem for us because they lead to misunderstanding and duplication.''

He said location mutation both slowed down mail delivery and drove up costs for the Postal Service, and thus ultimately the public.

As Marla G. Simpson, director of land-use planning for the Manhattan Borough President in 1990, said about the problems (that are still being complained about):

''We are concerned about out-of-sequence and vanity addresses. They're really proliferating. It's hard even for old-timers - but particularly for newcomers - to find their way around town.''

Scandalously Named . .

If we are going to rename parts of the city in order corporately brand them, at least it would be a good idea not to give them names that invoke recent scandals. Citibank is one of the teetering financial institutions that, quite likely to go under, was recently rescued by the Federal Government. At the same time, the New Mets Stadium was opening, named after that bailed-out bank: Citi Field. As pointed out by Brian Lehrer on the New York Times web site:

. . . in the case of New York, imagine the real estate battles à la Atlantic Yards, the pollution, and the additional public subsidies . . . . Meanwhile, the name Citi Field is fast becoming a joke. Shall we rename it Taxpayer Field? Federal Reserve Park? Cover the infield with the Henry Paulson TARP?

The huge preponderance of suggestions (138 from Brian Lehrer listeners alone) for the renaming of the stadium reflect the public’s anger: “Debits Field,” “Field of Nightmares,” “Field of Schemes,” “Bailout Ballpark.” “The Field That Ruthless Built (reserved for the Yankees new stadium)” “Shea-m (Shame) Stadium,” our own “Shady Stadium” suggestion, or taking a cue from Bill Maher“SITTY Field with the H.”

Brand Tending: When Less Is More

A story last week on NPR’s Marketplace about Wimbledon mentioned the new inauspiciously named Mets Citi Field and suggested that corporate sponsorship pollution has gotten entirely out of hand. It also suggested that there is value, even financial value, to restraint. (The short piece is so good and pertinent we must apologize for quoting it at unusual length. Emphasis supplied.):

JON WERTHEIM: Last month I attended a New York Mets game at Citi Field; Citi being the TARP-assisted bank that still finds $20 million a year to slather its name on a baseball stadium. The outfield walls are adorned with signs for everything from Verizon to Pepsi. I counted eight logos on the scoreboard alone. My ticket doubled as a coupon for Subway sandwiches. When it comes to sponsorship, the Mets still trail their crosstown rivals, the Yankees. At the new Yankee Stadium, where the Mohegan Sun Sports bar blocks views from the cheap seats, even the home runs are brought to you by Geico.

But at Wimbledon? The only logos there are tiny, tasteful representations for Rolex, the scoreboard provider, IBM, stats provider, Slazenger, the ball provider, and Robinson's barley water, the provider of barley water. And while television pays a premium for weekend broadcast rights, Wimbledon not only starts on a Monday, but schedules no play for the middle Sunday so they don't disturb the neighborhood on the holiest day of the week.

Why does Wimbledon leave so much money on the table, easily tens of millions a year, when other sporting properties do everything short of look behind bleachers for extra change to boost revenue? When I asked a tournament official, he laughed gently and said, "While there are plenty of offers for sponsorship, if the tournament hung banners behind the baseline or sold naming rights to center court, Wimbledon wouldn't be Wimbledon, would it?"

Yes, there's money to be made from having a business sponsor your mascot or from carving out luxury suites. But there's also equity in tradition and dignity. Wimbledon "doesn't do costings" -- that is, make its financials available to gauche journalists -- but profits from 2008 exceeded $50 million. This suggests that protecting the brand, and keeping "Wimbledon, Wimbledon," has plenty of value as well. In short, a sporting event's soul is worth something, too.

It sure would be nice if more franchises adopted this philosophy. Even if meant that home runs were to brought us by the actual batter that hit them; not by an insurance company.

WNYC’s recent story that we mentioned at the beginning of this post also reported that the naming rights advertising arms race is not likely to be productive for the advertisers either, putting them in a position where they are simply playing defense to keep pace with other naming rights deals. In this particular context, that of course presumes that the MTA is about to sell off the naming of the rest of the city subway stations. If it isn’t, it just gave Forest City Ratner a very special benefit.

Recommendation: MTA Ought to Have Comprehensive Guidelines and Take Time To Think

We think that before the MTA starts selling naming rights for subway stations across the city it has some really serious thinking to do about its stewardship of the public realm. If it is to be done (and we don’t think the negatives can be underestimated), it should be done only pursuant to a carefully thought-out set of comprehensive guidelines. There should be time for groups like the Municipal Art Society, which has been concerned with such issues for more than 100 years, to weigh in.

Carelessness or Bloombergian Proclivity?

We don’t see that this thoughtfulness and comprehensive approach is what actually happened. Instead, we saw what looked like a slaphappy process whereby a very valuable and substantial MTA asset was handed out to a politically favored developer for a fraction of its worth and without regard to the impact on the public. Was this pure carelessness or another example of the extreme predilection of the Bloomberg administration to sell as much of New York’s public realm as conceivably possible to real estate developers for the merest pittance?

Addendum, Tomorrow’s New York Times Editorial: Just as we posted this article it came to our attention that tomorrow’s New York Times contains an editorial, Where Geography Matters, June 28, 2009, that opposes the sale to Ratner of the right to name the subways. We are actually very surprised: This is the first time the editorial page has opposed the slightest thing about the Atlantic Yards deal though so much had been highly objectionable and worthy of more than a few editorials. But the Times and Ratner have had a business relationship.

The editorial, more serious and sensible that the earlier Times story we wrote about above, makes some key points central to what we have written here:

When you get off the train at a subway station, you want to know where you are, not who your sponsor is. Names aren’t as easily changed as all that, especially when they correspond — as the names of subway stations do — to the actual geography of the city.

The names of subway stations are beautifully utilitarian just as they are, shifting only as rapidly as the streets above them shift. The names of their sponsors are likely to shift with the economic climate . . .

It starts off with what we consider to be a mistake when it unskeptically appraises the $200,000 annual sum Ratner will pay for a 20-year period thus:

We know that is a goodly sum and times are very tough for the M.T.A.

“A goodly sum?” We believe that if the MTA were truly behaving like an agency that was cash strapped it would have negotiated a far higher sum, one that should probably escalate each year.

No matter. Congratulations to the New York Times for a small step in the right direction. We can however add this editorial to the list of New York Times editorials that ineffectually try to rein the mayor in after this same Times editorial page unleashed the mayor by endorsing his plan to overturn term limits. (See: Saturday, November 15, 2008, The Mayor, The Times’ Timing, and a Proper Ordering.)

About Me

NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com